Budget 2014 – Analysis by CA Gaurav Mittal

CA Gaurav Mittal

KEY HIGHLIGHTS

1)      Fiscal Deficit targeted at 4.1% for 2014-15 and to bring it to 3% by 2016-17.

2)      GST to be introduced by the year end.

3)      No retrospective amendments by this Government.

4)      A new committee under CBDT to study cases pending because of retrospective amendments.

5)      FDI on Defense and Insurance raised to 49%.

6)      To allow FDI upto 49% in select sectors.

7)      E Visa to be allowed on 9 major Airports.

8)      PSU Banks to need a Capital Infusion of Rs 2.48 Lakhs Crore by 2018.

9)      Change in Dividend Distribution Tax Calculation applicable from 1^st Oct 2014.

10)  Various Plans And Budget Allocations

DIRECT TAX PROVISIONS

1)      New Slab Rates

FOR INDIVIDUALS & HUF & BODY OF INDIVIDUALS

Upto Rs.2,50,000                                             Nil.

Rs. 2,50,001 to Rs. 5,00,000                           10 per cent.

Rs. 5,00,001 to Rs. 10,00,000                                     20 per cent.

Above Rs. 10,00,000                                       30 per cent.

FOR SENIOR CITIZEN

Upto Rs.3,00,000                                             Nil.

Rs. 3,00,001 to Rs. 5,00,000                           10 per cent.

Rs. 5,00,001 to Rs.10,00,000                          20 per cent.

Above Rs. 10,00,000                                       30 per cent.

FOR SENIOR CITIZEN AGED ABOVE 80 Years

Upto Rs. 5,00,000                                            Nil.

Rs. 5,00,001 to Rs. 10,00,000                                     20 per cent.

Above Rs. 10,00,000                                       30 per cent.

If Total Income crosses One Crore then the above rates would be enhanced by 10% Surcharge.

2)      80C Limit Enhanced to Rs 150000 from Rs 100000.

3)      Deduction from House property Enhanced from Rs 150000 to Rs 200000.

4)      Amendment in Section 32AC of Income Tax Act, Limit reduced from 100 Crore to Rs 25 Crore.

Section 32AC states that 15% Investment Allowance would be allowed in case company Invest Rs 25 Crore or more in Plant and Machinery.

15% is over and above the Depreciation.

5)      10 year tax holiday extended to the undertakings which begin generation, distribution and transmission of power by 31.03.2017.

6)      2 New Business Added for Deduction Under Section 35AD

1. Slurry Pipeline for transportation of Iron Ore.
2. Setting Up and Operating a Semi conductor wafer fabrication Manufacturing Unit.

7)      Use period of 8 years now specified under section 35AD.

8)      Period of holding for short term capital gain has been increased to 36 Months for shares.

9)      Foreign Dividend received by Indian companies now will get low tax benefit of 15% without limiting it to particular Assessment Year.

10)  Section 92CC of the Act relates to Advance Pricing Agreement (APA). However, these agreement were valid for future transactions and transaction entered earlier usually enter into Litigations. In order to streamline this, APA may be sought for 4 previous years.

11)  Security held by FII which has invested such In such security in accordance with regulations made under SEBI Act,1962 would be treated at Capital Asset and any income arising from that would be capital Gain.

12)  Entities other than companies claiming deduction under Section 35AD, now under the preview of Alternate Minimum Tax taxable @ 18.5%. However benefit of depreciation would be allowed.

Example:

Total income :                                                                                     Rs. 60

Deduction claimed under Chapter VI-A :                                           Rs. 40

Deduction claimed under section 35AD on a capital asset :              Rs. 100

Computation of adjusted total income for the purposes of AMT

Total income :                                                                                     Rs. 60

Addition:

(i) deduction under Chapter VI-A (on non-specified business) :         Rs. 40

(ii) deduction under section 35AD (on specified business)    Rs. 100

Less: depreciation under section 32                                       Rs. 15 Rs. 85

Adjusted total income under section 115JC :                                     Rs. 185

13)  Any advance forfeited against any capital asset would now be taxable under income from other Sources. Also, advance forfeited earlier was reduced from cost of asset and now it won’t be reduced to remove double taxation.

14)  Any sum received from Life Insurance companies which is not exempt under section 10(10D) of the Act, including sum received as bonus would now be subject to TDS @2% . However if amount received is less than 1 Lac no TDS is to be deducted.

15)  Transfer pricing officer now powered to levy penalty Under Section 271G of the Act. Earlier only AO has the power to levy penalty.

16)  Expenditure incurred under CSR would not be allowed as deduction under section 37 of Income tax Act.

17)  In case of Non deduction of TDS or nonpayment of tax, the disallowance would be restricted to 30% of the amount of expenditure.

18)  Applicability of section 40(a)(ia) {i.e. disallowance of expenditure in case TDS is not deducted or not paid} on payments made under chapter XVII-B {I.e Salary, director remuneration etc.}

19)  Presumptive tax in case of plying, hiring or Leasing of goods carriages in case assessee does not hold 10 good carriages at any time during the year.

Presumptive tax increased to Rs 7500 per vehicle per month.

20)  Any transfer of government security carrying a periodic payment of interest from one non resident to another non resident would not be considered as transfer under section 47 of Income Tax Act.

21)  Amendment under section 54 : Deduction is only available if new resident house is located in India

22)  Amendment under section 54F : Deduction is available for only 1 residential house located in India.

23)  The eligible date of borrowing in foreign currency extended from 30.06.2015 to 30.06.2017 for a concessional tax rate of 5 percent on interest payments. Tax incentive extended to all types of bonds instead of only infrastructure bonds.

24)  Mutual fund company, venture capital company and venture capital fund and securitization fund are now required to furnish a return of income under section 139(4C) of income tax act.

25)  Deduction under Section 80CCD now allowed to Private sector employees too.

Section 80CCD relates to contribution to pension funds subject to a maximum of 10% of salary.

(Author may be contacted at  [email protected])